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What is the original price of a commodity when the price elasticity is .71 and demand changes from 10 units to 15 units and the new price is?
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What is the original price of a commodity when the price elasticity is...
Understanding Price Elasticity of Demand
Price elasticity of demand measures how much the quantity demanded of a good responds to a change in price. In this scenario, the price elasticity is 0.71, indicating inelastic demand, meaning that demand changes less proportionately than the price does.
Calculating the Change in Demand
- Initial Demand: 10 units
- New Demand: 15 units
- Change in Demand: 15 - 10 = 5 units
Calculating the Percentage Change in Demand
- Percentage Change in Demand: (Change in Demand / Initial Demand) * 100
- Percentage Change: (5 / 10) * 100 = 50%
Using Price Elasticity to Find Price Change
Since we have the price elasticity of demand (PED) formula:
- PED = (% Change in Quantity Demanded) / (% Change in Price)
- Rearranging gives us: % Change in Price = (% Change in Quantity Demanded) / PED
Substituting the values:
- % Change in Price = 50% / 0.71 ≈ 70.42%
Calculating the Original Price
Let the original price be P. If the new price is P_new:
- P_new = P * (1 + % Change in Price)
- P_new = P * (1 + 0.7042) = P * 1.7042
Given that the new price is P_new, we can express the original price as:
- P = P_new / 1.7042
To find the original price, you need to know the new price. If, for example, the new price is $100:
- Original Price = $100 / 1.7042 ≈ $58.74
In conclusion, with the new price known, you can easily calculate the original price of the commodity.
Price elasticity of demand measures how much the quantity demanded of a good responds to a change in price. In this scenario, the price elasticity is 0.71, indicating inelastic demand, meaning that demand changes less proportionately than the price does.
Calculating the Change in Demand
- Initial Demand: 10 units
- New Demand: 15 units
- Change in Demand: 15 - 10 = 5 units
Calculating the Percentage Change in Demand
- Percentage Change in Demand: (Change in Demand / Initial Demand) * 100
- Percentage Change: (5 / 10) * 100 = 50%
Using Price Elasticity to Find Price Change
Since we have the price elasticity of demand (PED) formula:
- PED = (% Change in Quantity Demanded) / (% Change in Price)
- Rearranging gives us: % Change in Price = (% Change in Quantity Demanded) / PED
Substituting the values:
- % Change in Price = 50% / 0.71 ≈ 70.42%
Calculating the Original Price
Let the original price be P. If the new price is P_new:
- P_new = P * (1 + % Change in Price)
- P_new = P * (1 + 0.7042) = P * 1.7042
Given that the new price is P_new, we can express the original price as:
- P = P_new / 1.7042
To find the original price, you need to know the new price. If, for example, the new price is $100:
- Original Price = $100 / 1.7042 ≈ $58.74
In conclusion, with the new price known, you can easily calculate the original price of the commodity.
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What is the original price of a commodity when the price elasticity is .71 and demand changes from 10 units to 15 units and the new price is?
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What is the original price of a commodity when the price elasticity is .71 and demand changes from 10 units to 15 units and the new price is? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about What is the original price of a commodity when the price elasticity is .71 and demand changes from 10 units to 15 units and the new price is? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is the original price of a commodity when the price elasticity is .71 and demand changes from 10 units to 15 units and the new price is?.
What is the original price of a commodity when the price elasticity is .71 and demand changes from 10 units to 15 units and the new price is? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about What is the original price of a commodity when the price elasticity is .71 and demand changes from 10 units to 15 units and the new price is? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is the original price of a commodity when the price elasticity is .71 and demand changes from 10 units to 15 units and the new price is?.
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